ERP by Mary SumnerChapter 1 Table 1 -1 Historical Evolution of ERP Systems

Independent vs. Dependent DemandIndependent Demand (Demand for the final endproduct or demand not related to other items) use forecasting)

Finished product

E(1)

Component parts

Dependent Demand (Derived demand items for component parts, subassemblies, raw materials, etc) => use MRP

Basic Fixed-Order Quantity Model and Reorder Point Behavior1. You receive an order quantity Q.Number of units on hand

4. The cycle then repeats.

Q R

Q

Q

2. Your start using them up over time.

LTime

R = Reorder point Q = Economic order quantity L = Lead time

L 3. When you reach down to a level of inventory of R, you place your next Q sized order.

Material Requirements Planning Materials requirements planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced Dependent demand drives MRP MRP is a software system More information about MRP can be found in Chapter 6 Handout ERP System: Production and Materials Management

5

Firm orders from known customers

Aggregate product plan

Forecasts of demand from random customers

Engineering design changes

Master production Schedule (MPS)

Inventory transactions

Bill of material file

Material planning (MRP computer program)

Inventory record file

Primary reports Planned order schedule for inventory and production control

Secondary reportsException reports Planning reports Reports for performance controlThe McGraw-Hill Companies, Inc.,

Closed Loop MRPProduction Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning

No Feedback

Realistic?

Feedback

YesExecute: Capacity Plans Material Plans

Manufacturing Resource Planning (MRP II)

Goal: Plan and monitor all resources of a manufacturing firm (closed loop):

manufacturing marketing finance engineering

Simulate the manufacturing system

ERP by Mary SumnerChapter 2 Table 2 -1 and 2- 2 Value Chain by Dr. Michael Porter (Harvard). We also use value chain in the SCM textbook by Chopra

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Value Chain Model: Highlights the primary or support activities that add business value A good tool for understanding strategy at the business firm level Primary Activities: Directly related to the production and distribution of a firms products or services

INFORMATION SYSTEMS AND BUSINESS STRATEGY

Support Activities: Make the delivery of primary activities possible Consist of the organizations infrastructure, human resources, technology, and procurement

What is the relationship between value chain and information technology?

Strategic question: How can IT be used at each point in the value chain to lower costs, differentiate products, and change the scope of competition? Example: Next slide

INFORMATION SYSTEMS AND BUSINESS STRATEGY

The Firm Value Chain and the Industry Value Chain

Figure 3-11

ERP by Mary Sumner

Just-in-Time/Lean Manufacturing/Toyota Production System Pages 91, 96, 137 Also required in the SCM textbook by Chopra

House of Toyota

Toyota Production System (TPS): Related Terms Ohno System MAN (Material as Needed) - Harley Davidson MIPS (Minimum Inventory Production Systems) - Westinghouse Stockless production - Hewlett Packard Zero inventory production system Lean Manufacturing/Production - MIT

Push versus Pull Push system: material is pushed into downstream workstations regardless of whether resources are available Pull system: material is pulled to a workstation just as it is needed

Traditional U.S. Manufacturing Firm: Push (old style MRP / Material Requirements Planning System) The production of items at times required by a given schedule planned in advance

Work Station 1

WS 2

WS 3

Material Information (Production Schedule)

Pull (JIT) SystemThe production of items only as demanded for use or to replace those taken for use.

Work Station 1

WS 2

WS 3

Material Information (via Kanban/Card)

Kanban Japanese word for card Pronounced kahn-bahn (not can-ban)

Authorizes production from downstream operations Pulls material through plant

May be a card, flag, verbal signal etc. Used often with fixed-size containers Add or remove containers to change production rate

Triangular KanbanPart # Part Description Location

Date Triggered

Lot Size

Trigger (Reorder) Point

Tool #

Machine #

Kanban

Figure S12.5

Basic Fixed-Order Quantity Model and Reorder Point Behavior1. You receive an order quantity Q.Number of units on hand

4. The cycle then repeats.

Q R

Q

Q

2. Your start using them up over time.

LTime

R = Reorder point Q = Economic order quantity L = Lead time

L 3. When you reach down to a level of inventory of R, you place your next Q sized order.

KanbanThe function of Kanban The function of Inventory Reorder Point (ROP)